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[LF.Anastasia]

GBP: British Pound is recovering after two days of sales

At the Forex currency market the British Pound Sterling rate is growing on Wednesday, regaining from the fall at the beginning of the week.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of break down at the level of 1.5990, target for the purchase will be the levels of 1.6000 and 1.6040. It became known yesterday that preliminary GDP in the UK rose by 0.5% q/q (+0.5% y/y) in Q3. In addition, volume of industrial output increased by 0.5% q/q (-0.7% y/y) in Q3.

Report on GDP became a good surprise for investors; however a member of MPC Mr. Osborne immediately stressed that Britain has to undergo a long way to achieve stability.

The head of the Bank of England Mervyn King drew attention to the fact that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, it is a double-edged sword, as no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline in inflation in 2012. CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which creates new impediments to economy. We would remind that at the meeting in October the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time, they increased volume of asset redemption program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the asset redemption program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the serious crisis now.

Member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a representative of the Bank of England and MPC, British economy demonstrates slow growth rate and a chance of recession in Q4 would not be a great surprise.

Debates about monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, that, as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%.

It became known earlier that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. As it became known earlier retail price index BRC in the UK rose by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Earlier it became known that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

 

[LF.Anastasia]

CHF: Swiss Franc strengthens on Wednesday

At the Forex currency market Swiss Franc rate is going up in the middle of the week after three sessions of sales.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal, while volumes are minimal. Stochastic Oscillator has come out of the oversold zone, and is going up in the neutral zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 0.8840, the pair USD/CHF will go to 0.8825 and 0.8810.

It became known yesterday that index of business activity PMI in Switzerland fell to 46.9 points in October against the forecast of 47.7 points. For the present is it aftereffect of the expensive national currency.

Macro-economic situation in Switzerland remains almost unchanged this morning. Surplus of trade balance amounted to 1850 billion SHF. It became known earlier that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive. Producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September; Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, due to the impact of expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start for consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc. Earlier trade union of Switzerland urged authorities and the Bank to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession. Representative of the Trade Union believe this measure will also support employment sector.

 

[LF.Anastasia]

JPY: Japanese Yen does not lose hope to strengthen

At the Forex currency market the Japanese Yen rate is traded upward in the middle of the week; however yesterday’s attempt to recover was not successful.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is going up steadily in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 78.05, the pair will go to 78.00 and 77.80. If downward breakdown does not take place, the pair will consolidate at the current levels.

Macro-economic situation in Japan remains unchanged.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released today, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to act promptly. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required.

We would remind that the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%. However, current dynamics is not impartial to assess efficiency of the intervention; the intervention in August helped to weaken the Yen for only 24 hours.

The Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected; at the same time, asset purchase program was increased up to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecasts in the future. According to the estimates of the Bank of Japan, exchange rate of the Yen will remain high for a while; the Bank has not clarified if currency intervention threatens the JPY or not.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

According to statistics released earlier this week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

 

[LF.Anastasia]

AUD: Australian Dollar has a chance to resume growth

At the Forex currency market the Australian Dollar rate is traded upward on Wednesday in response to the improvement in investor sentiments at the global capital markets.

Forex forecast: MACD indicator for the pair AUD/USD is in the positive area, giving a buy signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0390, the pair will go to 1.0400 and 1.0430. If upnward breakdown does not take place, the pair will consolidate at the current levels.

Yesterday, Reserve Bank of Australia announced reduction in the interest rate up to 4.50% per annum, by 25 basis points, which in general agreed with expectations.

In the follow-up comments the RBA said that inflation is being curbed now due to the high rate of the currency and low demand of population; regulator expects that in 2012 inflation will be at the level of 2-3%. The Bank also emphasized deterioration of the conditions in the labour market and decrease in prices for the raw materials. Concern about developments in Eurozone is still high, and growth rate of the national economy seems to be moderate.

According to RBA, lending rates are now slightly higher than the average level, even despite softening of general conditions. Note also, that RBA hinted at further lowering of the rates if general conditions do not improve. Unemployment rate in Australia declined to 5.2% in September versus the level of 5.3% in August. This data demonstrated dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.

Business confidence NAB in Q3 amounted -4 points while in Q3; while the index had been at the level of +5 points in Q2. According to observers’ estimates the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted +5 points against +10 points previously and amounted to level of +18 points on annual basis against prior +27 points. Sharp decline in the indicator kicked off a quarter earlier, is still going on.

We would remind that according to the data released earlier, CPI in Australia rose by 0.6% q/q (+3.5% y/y) in Q3 against the forecast of growth by 0.5% on quarterly basis. At the same time, inflation increased by 0.9% on quarterly basis in Q2; slowdown in CPI is obvious. It is worth noting that seasonally-weighted CPI rose by 0.3% (it is being tracked by RBA). Growth of inflation has been the lowest since Q3 in 1997. The data released earlier showed that consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. Monetary politician, Mr. Evans noted today that it is possible that the rate might go down in November, since low growth of the index proves general pessimistic sentiment.

 

[LF.Anastasia]

EUR/USD: Euro is losing positions under the pressure of Greek problems

The pair EUR/USD is traded downward at the Forex currency market on Thursday morning because Greek issue is still unsettled

By 10.00 MSK the Euro is at 1.3703 against yesterday’s closing level of 1.3746.

So, special meeting of the representatives of Germany, France and Greece with ECB and IMF ended in vain. Referendum in Athens will be held in December, not in January, as expected and the issue of financing in the country will be also postponed until normalization of the situation. According to IMF, Greece will not receive funds until exact solution is made of who and how shall provide help.

The meeting of the U.S. Federal Reserve, which ended yesterday, did not bring surprises, the rate was left at the previous level and the head of the FR Ben Bernanke did not say anything new.

Traders’ attention today will be focused at the meeting of the ECB, most likely the rate will remain stable and volumes of the asset repurchase can be increased.

Most likely the pair EUR/USD will be in the range of 1.3670-1.3740 at the trading session on Thursday.

 

[LF.Anastasia]

GBP: Positions of British Pound are getting weaker

At the Forex currency market the British Pound Sterling rate is declining on Thursday morning in response to the continuing negative sentiments among investors.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal.

Forex recommendations: in case of break down at the level of 1.5890, target for the sales will be the levels of 1.5870 and 1.5850.

Macro-economic situation is Great Britain has not changed significantly. The Pound Sterling actively reacts to the changes in the external background where unsettled Greek issue interferes with the progress in buying.

The head of the Bank of England Mervyn King drew attention to the fact that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, it is a double-edged sword, as no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline in inflation in 2012. CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which creates new impediments to economy. We would remind that at the meeting in October the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time, they increased volume of asset redemption program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the asset redemption program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the serious crisis now.

Member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a representative of the Bank of England and MPC, British economy demonstrates slow growth rate and a chance of recession in Q4 would not be a great surprise.

Debates about monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, that, as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%. It became known earlier that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. As it became known earlier retail price index BRC in the UK rose by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Earlier it became known that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

As it became known earlier, preliminary GDP in the UK rose by 0.5% q/q (+0.5% y/y) in Q3. In addition, volume of industrial output increased by 0.5% q/q (-0.7% y/y) in Q3. Report on GDP became a good surprise for investors; however a member of MPC Mr. Osborne immediately stressed that Britain has to undergo a long way to achieve stability.

 

[LF.Anastasia]

CHF: Swiss Franc is determining movement direction

At the Forex currency market Swiss Franc rate is traded slightly downward, while external background remains tense.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal, while volumes are minimal. Stochastic Oscillator is growing in the neural zone, approaching overbought zone and is giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.8880, the pair USD/CHF will go to 0.8895 and 0.8920.

Macro-economic situation in Switzerland remains almost unchanged this morning. It became known yesterday that index of business activity PMI in Switzerland fell to 46.9 points in October against the forecast of 47.7 points. For the present, it is the aftereffects of the expensive national currency.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, due to the impact of the expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start for consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc. Earlier trade union of Switzerland urged authorities and the Bank to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession. Representative of the Trade Union believe this measure will also support employment sector.

Surplus of trade balance amounted to 1850 billion SHF. It became known earlier that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive. Producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September; Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible.

 

[LF.Anastasia]

JPY: Japanese Yen does not lose aspiration for growth

At the Forex currency market the Japanese Yen rate is traded evenly on Thursday, which on the one hand is the indication of presence of the Bank of Japan in the trades, and on the other hand is a reflection of uncertainty in the market sentiments.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is going up steadily in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 78.00, the pair will go to 77.90 and 77.70. If downward breakdown does not take place, the pair will consolidate at the current levels.

Japanese market is closed today.

This week, the Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected; at the same time, asset purchase program was increased up to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecasts in the future. According to the estimates of the Bank of Japan, exchange rate of the Yen will remain high for a while; the Bank has not clarified if currency intervention threatens the JPY or not.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

According to statistics released earlier this week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released yesterday, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to take prompt actions. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required.

We would remind that the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%.

 

[LF.Anastasia]

AUD: Sales of Australian Dollar have not subsided

At the Forex currency market the Australian Dollar rate is traded downward on Thursday in response to the decline of investors’ interest in risk.

Forex forecast: MACD indicator for the pair AUD/USD is in the positive area, giving a buy signal. Stochastic Oscillator is going down in the neutral zone, coming closer to the oversold zone, and is giving a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0210, the pair will go to 1.0200 and 1.0180. If upward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that retail sales in Australia rose by 0.4% m/m in September against the growth of 0.6% m/m in August. The data agreed with expectations; the growth has been observed in all retail sectors, although it was just minor.

Earlier, the Reserve Bank of Australia announced reduction in the interest rate up to 4.50% per annum, by 25 basis points, which in general agreed with expectations. In the follow-up comments the RBA noted that inflation is being curbed now, due to the high rate of the currency and low demand of population; regulator expects that in 2012 inflation will be at the level of 2-3%. The Bank also emphasized deterioration of the conditions in the labour market and decrease in prices for the raw materials. Concern about developments in Eurozone is still high, and growth rate of the national economy seems to be moderate.

According to RBA, lending rates are now slightly higher than the average level, even despite softening of general conditions

It also worth noting, that RBA hinted at further lowering of the rates if general conditions do not improve.

Unemployment rate in Australia declined to 5.2% in September against the level of 5.3% in August. The data shows dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.

According to the data released earlier, consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. Monetary politician, Mr. Evans emphasized a chance that the rate might go down in November, since low growth of the index indicates general pessimistic sentiment.

Business confidence NAB in Q3 amounted to -4 points in Q3; while the index had been at the level of +5 points in Q2. According to estimates of the observers, the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted to +5 points against +10 points previously and amounted to level of +18 points on annual basis against prior +27 points. Sharp decline in the indicator kicked off a quarter earlier, is still going on.

We would remind that according to the data released earlier, CPI in Australia rose by 0.6% q/q (+3.5% y/y) in Q3 against the forecast of growth by 0.5% on quarterly basis. At the same time, inflation increased by 0.9% on quarterly basis in Q2; slowdown in CPI is obvious. It is worth noting that seasonally-weighted CPI rose by 0.3% (it is being tracked by RBA). Growth of inflation has been the lowest since Q3 in 1997.

 

[LF.Anastasia]

EUR/USD: Euro is stable at the end of the week

The pair EUR/USD is traded slightly downward at the Forex currency market on Friday morning after yesterday’s meeting of the ECB and a new course of European monetary policy

By 9.30 the Euro is at 1.3814 against yesterday’s closing level of 1.3822.

So, new head of the European Central Bank Mario Draghi announced yesterday that interest rate was lowered by 25 basis points, to the level of 1.25% per annum, which should stabilize monetary situation in Eurozone.

Meanwhile, situation in Greece remains tense: the country is ready to form an opposition government which is most likely to override the previously assigned referendum.

Most likely the pair EUR/USD will be in the range of 1.3780-1.3860 at the trading session on Friday.